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Sure there's a market for a portable game-centric handheld ... problem for Sony is there's only enough space left these days for one company, and Nintendo basically already took that seat at the table.

And even the 3DS, I don't think will come anywhere close to the DS' sales, I think it will cap out around 90-95 million or so, a large drop from 150+ million for DS.

The other problem for Sony is the handheld market is likely never going to appeal to the "dudebros" segment. If they want to play Call of Duty or Madden NFL, that's what their home console is for. The handheld market is much oriented towards kids, and in that market, Sony's LittleBigPlanet doesn't cut the mustard versus Mario, Pokemon, Kirby, Animal Crossing, etc.